Rural income set for over 20% growth in next 3 quarters: Report

"Overall, we believe that farm income, which constitutes 36 per cent of the rural income is on track for an over 20 per cent growth while non-farm income that constitutes 64 per cent of the rural income, is likely to remain supportive with growth in single digits."PTI | October 22, 2016, 12:45 IST

"Overall, we believe that farm income, which constitutes 36 per cent of the rural income is on track for an over 20 per cent growth while non-farm income that constitutes 64 per cent of the rural income, is likely to remain supportive with growth in single digits," the report by domestic brokerage JM Financial Institutional Securities said.

This high double-digit growth will continue for the next three quarters, it added.

The projection is based on the brokerage's visits to 14 districts in 10 states -- Punjab, Bihar, Andhra, Telangana, Haryana, Karnataka, Tamil Nadu, Maharashtra, UP, and MP -- which according to them together contribute 69 per cent of the agri-GDP validates, and reiterates its earlier forecast.

The projection of over 20 per cent annual growth is based on higher crop yields, lower input costs for irrigation, lower fertiliser cost due to price caps, lower insecticide cost as there is lesser incidence of pest attacks, and a steady, but single-digit improvement in non-farm income.

Rural households currently spend around 30 per cent of their income to deleverage, 25 per cent on farm investment, 18 per cent on house repairs and 28 per cent on festivals and marriage-related discretionary spending.

All indicators such as soil humidity and almost full water reservoirs point towards a strong rabi crop, it said.

The report notes that the normal monsoon has led to a 3.5 per cent increase in kharif-sown area, wherein pulses sowing area grew 29 per cent.

"Based on our estimates of the farm and non-farm income growth across states, and the resultant wealth effect, we expect rural consumption sentiment to be ahead in all states under the study, barring Karnataka," the report said.

The brokerage had done four such surveys called 'Rural Safar' in the past 20 months, with the first two in March 2015, followed by October 2015 and then in April 2016.

In the April 2016 survey, it had found that farm income declined by 6-8 per cent in the past two years, leading to higher leverage of farmers to the tune of 200-300 basis points.